• The coalition government collapsed on Tuesday after newly-elected President Viktor Yanukovich moved to oust Prime Minister Tymoshenko.
  • Yanukovych’s Deputy Chief, Irina Akimova, informed news agency UNIAN that Ukraine will continue to service its foreign debt but that the domestic situation is more complicated.
Ukraine's ruling coalition collapsed as newly elected President Viktor Yanukovich moved to oust Prime Minister Yulia Tymoshenko. The collapse of Tymoshenko's government is not entirely surprising given she lost the presidential elections. Thus, the market reaction should be rather neutral or even positive as the expected consolidation power of the newly-elected president should help to ensure some political stability.

However, speculation regarding the default of domestic debt indicated that the current stance on the budget remains troublesome. Furthermore, Ukrainian officials have been discussing the issue of loan payments due in April that will be difficult to manage. Therefore, we would expect to see increased market focus on the Ukrainian debt issue in
the coming weeks. It is important to note that the new government will have to resume the negotiations with the IMF soon to ensure the disbursements of the reminder of the
Ukraine’s IMF loan which have been stalled on account of the recent presidential elections.

Looking ahead, we would certainly keep a close eye on Ukraine’s ability to service both domestic and foreign debt and there is no doubt that it could become very challenging for
Ukraine to raise funds in the markets if more funds are not disbursed on Ukraine’s IMF
loan. For now, there has been very little concern over the Ukrainian debt issue but that
could certainly change if Ukrainian officials continue to hint at a possible default as Irina
Akimova has done today.